Floor function · executable risk · zero is valid
6Z Position Sizing: Risk Budget to Whole Contracts
If the declared budget is $600 and one contract's stressed loss is $622.50, the correct size is zero contracts. Margin availability cannot round that answer up.
Measure before dividing
Six Inputs Must Exist Before Size Exists
| Input | Required definition | Fail-closed result |
|---|---|---|
| Dollar risk budget | Maximum planned loss allocated to this decision, after portfolio limits | No declared budget = zero |
| Invalidation price | A thesis-based level known before entry, not a distance chosen to force size | No valid invalidation = zero |
| Executable distance | Entry-to-stop distance rounded conservatively to the current tick ladder | Uncertain entry or stop = zero |
| Execution allowance | Stressed entry and exit slippage appropriate to quantity and state | No defensible estimate = zero |
| Gap/event allowance | Separate non-continuous-move stress, including planned hold windows | Unsupported overnight/event hold = zero |
| Fees | Round-turn broker, exchange, clearing and applicable regulatory costs | Unknown costs remain a conservative estimate |
Always round down
Calculate Per-Contract Loss, Then Apply the Floor
loss/contract = (stop ticks + execution ticks + gap ticks) × $12.50 + feescontracts = floor(risk budget ÷ loss/contract)→then apply portfolio and margin capsBase worked calculation
Hypothetical risk budget $1,250; stop 36 ticks; execution 5 ticks; gap allowance 8 ticks; fees $10. Per-contract loss = 49 × $12.50 + $10 = $622.50. Floor($1,250 ÷ $622.50) = 2 contracts. Planned stressed loss = $1,245, leaving $5 unused.
- Budget
- $1,250
- Total ticks
- 49
- Per contract
- $622.50
- Size
- 2
The boundary cases matter most
Reconcile Whole-Contract Outcomes
| Case | Budget | Stop + execution + gap | Fees | Loss/contract | Contracts |
|---|---|---|---|---|---|
| Below minimum | $600 | 49 ticks | $10 | $622.50 | 0 |
| Exact base | $1,250 | 49 ticks | $10 | $622.50 | 2 |
| Wider thesis stop | $1,250 | 72 ticks | $10 | $910.00 | 1 |
| Event excluded | $1,250 | Unknown | $10 | Unknown | 0 |
If the smallest contract does not fit the valid invalidation and stress budget, do not trade, reduce portfolio risk elsewhere or use a genuinely smaller instrument if one is available and independently verified.
Inputs need evidence, not convenient constants
Estimate Execution and Gap Risk From Comparable Orders
A fixed two-tick slippage allowance is easy to calculate and hard to defend. Estimate costs from orders comparable in contract, expiry, side, quantity, session, event proximity and liquidity state. Separate entry from exit because a passive entry and urgent stop exit have different fill processes.
| Input | Preferred evidence | Conservative fallback |
|---|---|---|
| Entry slippage | Decision, arrival and fill prices from comparable submitted orders, including misses and partials | Current spread plus a documented adverse movement allowance |
| Stop-exit slippage | Trigger-to-fill distribution for the same order logic and market state | Worse than entry; include book sweep at intended quantity |
| Gap allowance | Timestamped price paths across comparable scheduled and unscheduled windows | Exclude the hold when evidence is insufficient |
| Fees | Actual account commission and current exchange, clearing and regulatory schedule | Round upward; never silently omit fees |
Choose a stated adverse percentile or stress rule before inspecting the prospective trade. Preserve the sample size, lookback, data source and exclusions. If the estimate is based only on bars, it cannot claim queue-aware fills. If there are too few comparable exits, widen the stress or return zero rather than treating missing data as zero cost.
Tick rounding
Round loss away from safety
Convert the absolute entry-to-invalidation distance to ticks and round up. For example, 0.000811 ÷ 0.000025 = 32.44, so the risk distance is at least 33 ticks, or $412.50 per contract before costs.
Price uncertainty
Recompute after the fill
If entry fills three ticks worse than planned and the invalidation is unchanged, add those ticks to risk. Cancel excess quantity if actual stressed loss breaches the approved budget.
The standard 500,000-rand contract is the whole-contract sizing unit. ClearPort's finer $0.50 price increment applies to the same standard unit and is not a smaller contract. If one standard contract is too large, the answer is zero 6Z contracts.
Size for adverse execution, not the chart line
Run Four Overlays Before Authorization
Liquidity
Spread and depth
Increase the execution allowance when intended quantity cannot be absorbed near the inside market; reject if measurement is unavailable.
Event
Gap and repricing
Model the hold through scheduled and unscheduled risk separately from ordinary stop slippage.
Lifecycle
Roll and expiry
Include two-leg costs when the holding horizon crosses the planned roll; block proximity to broker delivery cutoff.
Model
Parameter error
Recalculate at a wider stop and worse cost. A size that survives only the best estimate is fragile.
Instrument size is not portfolio size
Cap 6Z After Aggregating Shared Risk
A 6Z trade can share broad-dollar, emerging-market, commodity or South African risk with other positions. Correlation is state-dependent, so do not grant diversification credit from one historical coefficient.
- Group common shocks.Tag positions by USD, rates, risk, commodity and country-event channels.
- Stress co-movement.Assume correlations move toward the harmful direction during a common shock.
- Aggregate loss.Apply each position's stressed execution and gap loss simultaneously.
- Take the lower cap.Authorized 6Z size is the minimum of trade-risk size, portfolio-risk size and current margin capacity.
Close the loop
Review Estimate Error, Not Just Trade P&L
| Record | Planned | Actual | Action |
|---|---|---|---|
| Entry and exit slippage | Ticks and source window | Decision, arrival, fill and benchmark prices | Refresh cost distribution |
| Stop path | Trigger and expected order branch | Trigger, submission, partials and final fill | Repair order assumptions |
| Gap | Stress allowance | Observed discontinuity | Change exclusion or reserve |
| Margin | Timestamped requirement and buffer | Peak requirement and equity low | Change cash gate, not risk budget |
Keep rejected zero-contract decisions in the review set. Removing them hides how often contract granularity prevents exposure and can make later capacity estimates look unrealistically generous.
Final authorization
Risk size 2, portfolio cap 1, margin cap 3 means trade 1
The smallest independent cap controls. If any cap is zero or unknown, the final size is zero.
Sources, methods and editorial disclosure — reviewed August 25, 2026
- 6Z tick-size and value authority for the current 500,000 ZAR unit and $12.50 Globex tick.
- CME Position and Risk Management for sizing from risk scenarios rather than maximum margin capacity.
- CME Performance Bonds/Margins for variable collateral requirements.
- CFTC futures risk disclosure for loss-beyond-deposit risk.
All budgets, stops, costs and results are hypothetical arithmetic. No optimal risk percentage, typical stop, slippage distribution or profitability is claimed. Stops and stress reserves cannot guarantee a maximum loss.